Land leasing trumps sales as sellers play cautious game
Brexit, stamp duty and the beef crisis impact the property market but there were strong prices for those that made the jump
Brexit, the beef crisis and the impact of long-term leasing were key elements in what many auctioneers describe as a nervous year in land sales in 2019.
While properties that made it to market sold well, there was apprehension around bringing them to market in the first place.
According to Clive Kavanagh of Jordan auctioneers, this nervousness was more evident in the supply side than on the demand side, with potential sellers reluctant to go to the market because "the tax benefits of longer-term leasing arrangements meant that some people who initially spoke to us opted for this route rather than make the final decision to sell".
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Tom Crosse of GVM also says that the leasing option is becoming increasingly popular with landowners and those looking for access to land.
"I negotiated the lease an 88ac farm in Tipperary on a 10-year lease at €30,000 per annum, that's at €340/ac and it's good money. The owner keeps the land, gets a tax-free income and the tenant doesn't have to worry about borrowings," he said.
GVM enjoyed some headline sales in 2019, particularly in the Adare area of Limerick. "It is strong farming country, but it is also one of the sought-after residential areas in Co Limerick," he said.
Three farms totalling 100ac made €2.5m or averaged €25,000/ac. Clive Kavanagh's experience reflects this and while he says the farming year was marked by much negativity, land that made it to market continued to sell and achieve strong prices.
"We sold just under 2,000ac in 2019 and most of the buyers were farmers," he said. However, it appears that the 'roads' money and the development money accumulated by farmers during the Celtic Tiger years is gone.
"For the third year running, we have experienced far more transactions dependent on finance to complete. Of our sales this year, approximately 88pc were subject to lending facilities," he said.
Looking ahead, Mr Kavanagh believes the key fundamentals of the land market will shape the year ahead. These include the quality of the property on offer, a strong local market and active adjoining farm neighbours.
In the west, Roscommon auctioneer John Earley said that Brexit, the beef crisis and the increase in stamp duty in the Budget had a negative impact on the land market, particularly in the later part of the year.
Overall, Mr Earley brought about 40 farms to market in 2019 as demand was strong, especially for smaller holdings of 10 to 50ac.
"Local interest was the main driver here," he said, "but we also saw a number of larger farms changing hands."
He describes the demand from the dairy sector for holdings of 200 to 300ac as exceptional. In terms of prices, he said good-quality land made between €7,000 and €8,000/ac, with poorer land commanding around €5,000/ac. Forestry land, he said, made between €4,500 and €5,000/ac.
Like his colleagues in Munster and Leinster, he believes the increase in long-term leasing has had a profound impact on the land market overall.
"It means that less land is available annually and new lettings are attracting strong interest due to the scarcity of supply," he said. Letting prices for land in his area varied from €200 to €250/ac for top-quality ground for leases of five years and longer, while lesser quality ground was making between €150 and €180/ac.
"Quality of fencing and farmyards and whether yards were included in the lease dictated the final price and terms agreed," he said. Looking ahead, Mr Earley expects land to hold its value as a solid investment. "For instance, tax breaks on leasing can see returns of 4pc to 5pc tax-free per annum, far outstripping return for money deposited in the bank."
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